Income Tax Amendment Regulations 2004 (No. 3) (Cth)

Income Tax Amendment Regulations 2004 (No. 3)1

Statutory Rules 2004 No. 1152

I, PHILIP MICHAEL JEFFERY, Governor-General of the Commonwealth of Australia, acting with the advice of the Federal Executive Council, make the following Regulations under the Income Tax Assessment Act 1936.

Dated 10 June 2004

P. M. JEFFERY

Governor-General

By His Excellency’s Command

HELEN COONAN

Minister for Revenue and Assistant Treasurer

Contents

1Name of Regulations

These Regulations are the Income Tax Amendment Regulations 2004 (No. 3).

2Commencement

These Regulations commence on 1 July 2004.

3Amendment of Income Tax Regulations 1936

1. (1)

   Schedule 1 amends the Income Tax Regulations 1936.

2. (2)

   Schedule 2 amends the Income Tax Regulations 1936 as amended by Schedule 1.

4Transitional

The amendments made by Schedules 1 and 2 apply in relation to:

1. (a)

   accounting periods; and

2. (b)

   statutory accounting periods; and

3. (c)

   years of income;

commencing on or after 1 July 2004.

Schedule 1Amendments

(regulation 3)

  

[1]Before regulation 152A

insert

Division 1General

[2]Subregulation 152A (2), definition of asset

substitute

CGT asset has the meaning given by section 108-5 of the Income Tax Assessment Act 1997.

[3]Subregulation 152A (2), definition of compulsory acquisition

omit

an asset,

insert

a CGT asset,

[4]Subregulation 152A (2), definitions of concessional rate of tax, interest income, normal company tax rate, offshore banking business, offshore financial business, offshore income, offshore insurance business, offshore investment business and offshore reinsurance business

omit

[5]Subregulation 152A (2), definitions of relevant

broad-exemption listed country, relevant period, relevant tax accounting period and shipping income

substitute

wholly-owned group has the meaning given by section

975-500 of the Income Tax Assessment Act 1997.

[6]Subregulations 152A (3) and (4)

substitute

1. (3)

   In this Part (other than in regulation 152D):

capital gains means gains or profits of a capital nature that arise from the sale or disposal of all or part of a CGT asset, other than gains or profits that would not be capital gains but for a provision of Australian tax law.

1. (4)

   In this Part:

passive income means passive income described in section 446 of the Act, subject to the following modifications:

1. (a)

   omit paragraph 446 (1) (k) and insert the following paragraph:

   1. ‘(k)

      capital gains in respect of tainted assets;’;

2. (b)

   if it is necessary to identify the designated concession income of an entity to which Division 6AAA of Part III of the Act applies, as part of using Schedule 9:

   1. (i)

      read each reference, as appropriate, in Part X to a company as a reference to the entity; and

   2. (ii)

      read each reference, as appropriate, in Part X to a statutory accounting period as a reference to a year of income;

3. (c)

   if it is necessary to identify the designated concession income of an entity to which section 23AH of Part III of the Act applies, as part of using Schedule 9, read each reference, as appropriate, in Part X to a statutory accounting period as a reference to a year of income.

[7]After regulation 152A

insert

Division 2Controlled foreign companies

[8]Regulations 152B to 152H

substitute

152BIncome or profits as designated concession income

1. (1)

   For the definition of designated concession income in section 317 of the Act, if:

   1. (a)

      a listed country is mentioned in column 2 of an item in Part 2 of Schedule 9; and

   2. (b)

      an entity mentioned in column 3 of the item derived income or profits that are:

      1. (i)

         of a kind specified in column 4 of the item; and

      2. (ii)

         further described in column 5 of the item;

the income or profits are designated concession income.

1. (2)

   For subregulation (1), the income or profits of an entity include:

   1. (a)

      the entity’s interest in the income or profits of a partnership in which the entity is a partner; and

   2. (b)

      the entity’s beneficial interest in the income or profits of a trust estate in which the entity is a beneficiary.

152CBroad-exemption listed countries and

limited-exemption listed countries

1. (1)

   For the definition of broad-exemption listed country in subsection 320 (1) of the Act, a foreign country or a part of a foreign country listed in Part 1 of Schedule 10 is declared to be a broad-exemption listed country for the purposes of Part X of the Act.

2. (2)

   For the definition of limited-exemption listed country in subsection 320 (1) of the Act, a foreign country or a part of a foreign country listed in Part 2 of Schedule 10 is declared to be a limited-exemption listed country for the purposes of Part X of the Act.

152DCapital gains regarded as subject to tax

1. (1)

   In this regulation:

capital gains means gains or profits or other amounts of a capital nature.

roll-over relief, in relation to a particular tax accounting period in relation to a listed country, means the deferral of tax liability in the tax accounting period under a tax law of the listed country because of a circumstance specified in regulation 152E.

1. (2)

   For section 324 of the Act, if:

   1. (a)

      capital gains that are derived by an entity are not subject to tax in a listed country in a particular tax accounting period; and

   2. (b)

      apart from the availability of roll-over relief, the capital gains would have been subject to tax in the listed country in the tax accounting period;

the capital gains are to be treated as if they were subject to tax in the listed country in the tax accounting period.

152ECircumstances specified for the definition of roll-over relief in regulation 152D

For the definition of roll-over relief in subregulation 152D (1), each of the following circumstances is specified:

1. (a)

   an entity:

   1. (i)

      is taken to have disposed of all or part of a CGT asset because of an act, transaction or event as a result of which the entity has received an amount of money or a replacement CGT asset:

      1. (A)

         by way of compensation for the compulsory acquisition, or for the loss or destruction, of the original CGT asset; or

      2. (B)

         under a policy of insurance against the risk of loss or destruction of the original CGT asset; and

   2. (ii)

      after receiving an amount of money mentioned in subparagraph (i), in order to achieve a deferral of tax liability under the tax law of the listed country, is required:

      1. (A)

         to incur expenditure in acquiring a CGT asset in place of the original CGT asset; or

      2. (B)

         to incur expenditure of a capital nature in repairing or restoring the original CGT asset;

2. (b)

   a company disposes of a CGT asset to another company, and the transferee is a member of the same wholly-owned group as the transferor;

3. (c)

   a company redeems or cancels all the shares of a particular class in the company, and:

   1. (i)

      an entity holds shares of that class in the company; and

   2. (ii)

      the company issues to the entity other shares in the company in substitution for the redeemed or cancelled shares; and

   3. (iii)

      the market value of the new shares immediately after they were issued is not less than the market value of the redeemed or cancelled shares immediately before the redemption or cancellation; and

   4. (iv)

      the entity did not receive any consideration (other than the new shares) in respect of the redemption or cancellation;

4. (d)

   an entity owns an option to acquire shares in a company or a right, issued by a company, to acquire shares in the company or to acquire an option to acquire shares in the company, and:

   1. (i)

      any of the shares:

      1. (A)

         are consolidated and divided into new shares of a larger amount; or

      2. (B)

         are subdivided into shares of a smaller amount; and

   2. (ii)

      as a result of the consolidation or subdivision:

      1. (A)

         the original option is cancelled; or

      2. (B)

         the original right is cancelled; and

   3. (iii)

      the company issues to the entity:

      1. (A)

         another option relating to the new shares in substitution for the original option; or

      2. (B)

         another right relating to the new shares, in substitution for the original right; and

   4. (iv)

      the market value of the new option or the new right, immediately after it was issued, is not less than the market value of the original option or original right immediately before its cancellation; and

   5. (v)

      the entity did not receive any consideration in respect of the cancellation, other than the new option or right.

[9]Regulations 152I and 152J

omit

[10]Before regulation 152L

insert

Division 3Foreign investment funds

[11]Schedule 9

substitute

Schedule 9Designated concession income

(regulation 152B)

Part 1Interpretation

101 In this Schedule, unless the contrary intention appears, words and phrases have the same meanings as they have in Part X of the Act or Part 8A of these Regulations, as the case requires.

Note Section 324 of the Act explains the meaning of the expression subject to tax. Section 325 of the Act explains when taxation occurs in a country at the country’s normal company tax rate.

Part 2Items of designated concession income

Item	Country	Entity	Kind of income or profit	Feature of income or profit under tax law of the country
201	Canada	An entity that operates in Canada as an international banking centre under Canadian law	All passive income and tainted services income	Not subject to tax in Canada in a tax accounting period
202	Canada	A company that operates in Canada as an investment corporation, or as a mutual fund corporation, under Canadian tax law	All passive income	Not taxed in Canada at the normal company tax rate
203	France	A company that operates in France as a société d’investissement à capital variable (SICAV) under French law	All passive income	Not subject to tax in France in a tax accounting period
204	France	A company that is treated as a resident of France for the purposes of the tax law of France, and that has elected to be taxed on a tonnage basis rather than on income or profits	All income or profits	Not used as the basis for establishing the amount of taxable income, taxable profits, tax base or tax liability of the entity under the tax law of France
205	Germany	A company that is treated as a resident of Germany for the purposes of the tax law of Germany	All passive income in carrying on business outside Germany at or through a permanent establishment	Not subject to tax in Germany in a tax accounting period
206	Germany	Either: (a) a company that is treated as a resident of Germany for the purposes of the tax law of Germany; or (b) any company in carrying on business in Germany at or through a permanent establishment of the company in Germany	Capital gains in respect of shares in companies	Not taxed in Germany at the normal company tax rate
207	Germany	A company that is treated as a resident of Germany for the purposes of the tax law of Germany, and that has elected to be taxed on a tonnage basis rather than on income or profits	All income or profits	Not used as the basis for establishing the amount of taxable income, taxable profits, tax base or tax liability of the entity under the tax law of Germany
208	Japan	An entity in carrying on business in Japan at or through a permanent establishment of the entity in that country	All income or profits derived from Japanese governmental bonds	Not subject to tax in Japan in a tax accounting period
209	New Zealand	Either: (a) a company that is treated as a resident of New Zealand for the purposes of the tax law of New Zealand; or (b) any entity in carrying on business in New Zealand at or through a permanent establishment of the entity in New Zealand	Capital gains in respect of tainted assets	Not subject to tax in New Zealand in a tax accounting period
210	United Kingdom of Great Britain and Northern Ireland	A company that is treated as a resident of the United Kingdom of Great Britain and Northern Ireland for the purposes of the tax law of the United Kingdom of Great Britain and Northern Ireland	Capital gains in respect of shares in companies where: (a) the CGT assets of the companies; or (b) the underlying CGT assets of the companies held through one of more non-resident entities that are associates; include CGT assets having the necessary connection with Australia	Not subject to tax in the United Kingdom of Great Britain and Northern Ireland in a tax accounting period as a consequence of the substantial shareholding exemption available under the tax law of the United Kingdom of Great Britain and Northern Ireland
211	United Kingdom of Great Britain and Northern Ireland	A company that is treated as a resident of the United Kingdom of Great Britain and Northern Ireland for the purposes of the tax law of the United Kingdom of Great Britain and Northern Ireland, and that has elected to be taxed on a tonnage basis rather than on income or profits	All income or profits	Not used as the basis for establishing the amount of taxable income, taxable profits, tax base or tax liability of the entity under the tax law of the United Kingdom of Great Britain and Northern Ireland
212	United Kingdom of Great Britain and Northern Ireland	An entity that operates in the United Kingdom of Great Britain and Northern Ireland as a open-ended investment company under the law of the United Kingdom of Great Britain and Northern Ireland	All passive income	Not taxed in the United Kingdom of Great Britain and Northern Ireland at the normal company tax rate
213	United States of America	Either: (a) a company that is treated as a resident of the United States of America for the purposes of the tax law of the United States of America; or (b) any entity in carrying on business in the United States of America at or through a permanent establishment of the entity in that country	All income or profits derived from tax-exempt governmental bonds	Not subject to tax in the United States of America in a tax accounting period
214	United States of America	An entity that operates in the United States of America as a regulated investment company under the tax law of the United States of America	All passive income	Not taxed in the United States of America at the normal company tax rate

[12]Schedule 10, heading

substitute

Schedule 10Broad-exemption listed countries and limited-exemption listed countries for the purposes of Part X of the Act

(regulation 152C)

Schedule 2Amendments to numbering

(regulation 3)

  

[1]Renumbering

The Regulations, as amended by Schedule 1, are renumbered as follows:

Provision	Renumber as
152HA	152F
152K	152G
152L	152H
152N	152I
152P	152J

[2]Schedule 12, heading

substitute

Schedule 12Approved stock exchanges for the purposes of Part XI of the Act

(regulation 152I)

[3]Schedule 13, heading

substitute

Schedule 13Approved international sectoral classification systems for the purposes of Part XI of the Act

(regulation 152J)

Notes

1. These Regulations amend Statutory Rules 1936 No. 94, as amended by 1939 Nos. 6 and 42; 1940 Nos. 138 and 289; 1941 Nos. 120 and 327; 1942 Nos. 339 and 553; 1943 Nos. 80, 127 and 151; 1944 Nos. 90 and 124; 1945 Nos. 12, 85, 169 and 192; 1946 No. 135; 1947 Nos. 77 and 173; 1948 Nos. 115 and 162; 1949 Nos. 25 and 50; 1950 Nos. 63 and 101; 1951 Nos. 136 and 157; 1952 Nos. 89, 90 and 102; 1953 Nos. 55 and 88; 1954 Nos. 11, 99 and 112; 1955 No. 23; 1956 Nos. 34, 35 (repealed by 1956 No. 96) and 96; 1957 Nos. 39 and 74; 1958 Nos. 27 and 70; 1959 Nos. 25 and 81; 1960 Nos. 44 and 74; 1962 Nos. 15, 44 and 112; 1963 Nos. 53 and 92; 1964 Nos. 74, 121 and 134; 1965 Nos. 133 and 187; 1966 No. 156; 1967 Nos. 112 and 126; 1968 No. 1; 1969 No. 68; 1970 Nos. 43, 126, 168 and 213; 1971 Nos. 120 and 148; 1972 Nos. 48, 50 and 137; 1973 No. 266; 1974 Nos. 193, 226 and 267; 1975 Nos. 88, 89, 99, 101 and 213; 1976 Nos. 115, 188 and 212; 1977 Nos. 77, 107 and 248; 1978 Nos. 85 and 193; 1979 Nos. 126 and 239; 1980 Nos. 86, 137 and 149; 1981 Nos. 116 and 360; 1982 Nos. 115, 128, 267 and 280; 1983 Nos. 79, 87, 111, 213 and 319; 1984 Nos. 172, 286, 408 and 416; 1985 Nos. 21, 148, 274 and 278; 1986 No. 325; Acts Nos. 28, 49 and 112, 1986; Statutory Rules 1987 Nos. 92 and 120; 1988 Nos. 196, 208, 262, 381, 382, 383 and 384; Act No. 97, 1988; Statutory Rules 1989 Nos. 67, 80, 115 (as amended by 1989 No. 358), 123, 124, 141, 250 and 358; 1990 Nos. 19, 126, 151, 152, 192, 347, 390, 398 and 468; 1991 Nos. 20, 121, 156, 158, 240, 300, 301, 390 and 391; 1992 Nos. 38, 129, 216, 313 and 449; 1993 Nos. 15, 46, 47, 65, 91, 159, 202, 216, 275, 288 and 370; 1994 Nos. 95, 96, 127, 174, 195, 219, 399, 412, 460, 461 and 462; 1995 Nos. 58, 107, 139, 152, 153, 194, 316, 356, 381, 382, 383 and 447; Act No. 30, 1995; Statutory Rules 1996 Nos. 38, 56, 114, 124, 133, 150, 185, 274, 320, 345 and 346; 1997 Nos. 68, 141, 148, 169, 176, 191, 196, 197, 270, 338, 368 and 416; 1998 Nos. 14, 92, 129, 163, 313 and 348; 1999 Nos. 79, 80 and 114; Act No. 60, 1999; Statutory Rules 2000 Nos. 39, 72, 90, 117, 229 and 262; 2001 Nos. 81, 100, 104, 107, 163 and 289; 2002 Nos. 44, 45, 101, 111, 169, 215 and 302; 2003 Nos. 204, 215, 262 and 372; 2004 Nos. 37 and 80.

2. Notified in the Commonwealth of Australia Gazette on 18 June 2004.